What's Caused Shell's Profits to Soar?

The oil recovery trend is quickly gaining momentum, and giants like Royal Dutch Shell are starting to reap the benefits. In the wake of revealing its "future-proof" business strategy the Anglo-Dutch oil major has reported climbing profits and positive signs of growth. Shell is the latest entity to report better than expected profits, with analysts maintaining that the trend will continue as the market recovery takes hold.

So what does it mean for the market? For investors Shell's growing cash flows could mark an end to the company's optional scrip dividend programme. The move would largely be powered by strong growth in retail, as well as fuels and chemicals.

Based on a current cost of supply, Shell recently reported US$4.1 billion in earnings. This represents a significant jump from the US$3.6 billion reported in the last quarter. Compared to the previous year, it marks a huge 50% increase.

Shell targets emerging growth areas

While stabilising oil prices have helped channel cash into the group, the returns are largely thanks to emerging areas of growth. Shell has been heavily investing in natural gas, refining and retail, all of which are starting to pay off. Ben Van Beurden, chief executive officer of Royal Dutch Shell maintains that the company's growing momentum is proof that his aggressive growth strategy is working.

Shell shifts its focus

Over the past year Shell has powered forward with a major revamp. It's shifted from oil to gas production, and is also placing a big focus on retail activities. It's also started to refine the petrochemicals used to make plastics, a move that will offer ongoing support if the oil markets slips.

Jessica Uhl, Shell's chief financial officer asserts that the company is cutting costs, reinvesting in growth engines and phasing out projects with limited returns.

Retail is a key area of growth, which has prompted shell to develop a “full suite of charge solutions.” It's just one of the innovation driven strategies designed to help Shell retain relevance and maintain profits in the electric car era.

The group is also channelling cash into refineries, with three major investments made over the past 24 months. Uhl confirms that low cost plants in China, Pennsylvania and the Gulf Coast are going ahead, with Shell also selling a US$3.8 billion package of UK North Sea assets to Chrysaor, a private-equity backed independent oil producer.

With a new focus on gas, Shell will be spotlighting the latest dry colorimetric detection techniques. For a closer look at the technology 'Nitrogen Oxides Measurements in Hydrocarbon Gases' explores how analysts are monitoring NOx at low concentrations for both laboratory and online analysis.